Confidence is not evidence about odds
How sure a person feels at the start is an accurate reading of that person and nothing else. Everybody standing in the same line was let in by the same feeling, so the group's rate does not move when one
excess entry
Meaning
Market saturation frequently occurs when too many competitors launch new ventures into the same sector simultaneously. This phenomenon is known as excess entry, and it typically leads to high failure rates and depressed returns for the majority of participants. It occurs because each entrant believes that their unique skill will allow them to outperform the others, despite the crowded field.
The collective result is an unprofitable environment where only a tiny fraction of ventures can survive.
Resource Pressure
Resource constraints are exacerbated when too many new businesses enter a single domain. In a state of excess entry, the cost of acquiring customers rises while margins shrink under the weight of competition. This congestion does not deter new founders, who continue to enter the space because they are focused on their own potential rather than the collective capacity of the market.
It ensures that the overall pool of capital is distributed too thinly to sustain the majority of projects.
Psychological Driver
Individual decision makers are highly susceptible to an optimism that isolates their own capability from the general trend. When a founder evaluates their chances of success, they usually focus on their own preparation and ignore the strength of the competitors. This focus on internal factors drives the excess entry that characterizes many new industries.
It creates a situation where everyone believes they are above average, and the group behaves as if the basic rules of supply and demand do not apply to them.
Economic Outcome
The ultimate consequence of this crowded field is a predictable wave of consolidation and failure. As the market corrects itself, the majority of the new entries are wiped out or absorbed by stronger competitors.